Characteristics of the Self-Employed

With EMSI’s new data categories, we can now more closely parse data on the major classes of workers in the labor market. This is a significant shift in how we present employment data, and one of the valuable applications is being able to track and analyze self-employed workers — those whose primary job, their chief source of income, is working on their own.

In this piece, we’ll use EMSI’s self-employment data to dig into a segment of the workforce that has previously been hard (or impossible) to get at for local researchers and planners. But first, it’s important to distinguish between EMSI’s two proprietors datasets and why we’re only focusing here on the self-employed, the third of our four class of workers.

We also track what we call extended proprietors. This is distinct, miscellaneous set of workers/income earners, and the fourth category included for subscribers to our web-based labor market research tool. Extended proprietors do side gigs or earn income through a sole proprietorship or partnership, most often (but not always) in addition to their primary job. If surveyed, they would not list this extra work as their main source of income. On the other hand, our self-employed dataset uses the American Community Survey and other publicly available sources to track proprietors who work for their own unincorporated business, practice, or farm. (People with incorporated businesses are considered wage and salary workers for their own companies, and are thus not considered proprietors).

In short, EMSI’s self-employment data gives an estimate of the true self-employed in the workforce (i.e., those who are primarily self-employed and consider themselves as such). And it does so at the county, ZIP code, MSA, and state level.

A Note on Monitoring Entrepreneurial Activity

EMSI’s two new proprietor datasets offer a window into entrepreneurial activity for any level of geography, but we caution against labeling all workers in the self-employed or extended proprietor classes as entrepreneurs. More accurately, inside the extended proprietors dataset are those who pursue extra work opportunities while maintaining their day job, while the self-employed dataset includes those who have taken the additional step and are primarily on their own. Once start-up owners incorporate their business, they fall under the traditional wage and salary worker datasets.

Another thing to keep in mind: As you compare EMSI’s self-employment numbers at the national level with other sources, you might find higher estimates of the self-employed workforce than EMSI’s. The Current Population Survey, for example, tracks workers’ primary and secondary self-employment, while the ACS — which again is what EMSI uses — keeps tabs on only primary self-employment. A teacher who mows lawns in the summer could fall in the secondary self-employed category in the CPS, but for the purposes of EMSI data, that teacher’s lawn mowing would be found in extended proprietors because if you asked him what he does for a living, he would say teacher.

Overview

There are an estimated 10.6 million self-employed jobs in the US, a 14.4% increase from 2001. From 2006-2008, this group of workers declined nearly 5% before employment mostly leveled off.

Self-employed workers make on average $26,921 — more than half the annual average of the total workforce ($56,053).

The self-employed population includes a large segment of older workers. Over 30% (3.25 million workers) are 55 or older; this includes more than a million workers who are at least 65. Another 28.2% of self-employed workers are 45-54.

Nearly 20% of all self-employed jobs are in the constructionindustry. Another 15% are classified under “other services (except public administration),” which includes repair & maintenance, personal & laundry services, religious and civic organizations, and private households. The next-largest industry is professional, scientific, and technical services (11% of self-employed jobs).

Note: The data in this post is from EMSI’s 2012.2 Class of Worker dataset.

Proportion of All Workers

Self-employed workers account for 7.1% of all U.S. workers, up from 6.4% in 2001. This percentage is lower that what the Current Population Survey reports, but again, we are looking at those who are primarily self-employed. Note that this proportion does not include peripheral proprietor activity through our extended proprietor dataset.

Among major sectors, the share of self-employed jobs is greatest in administrative and support services (particularly landscaping and janitorial services); agriculture, forestry, fishing and hunting; construction; and transportation and warehousing. In each of these sectors, 20% or more of the workforce is classified as self-employed.

As shown in the chart below, agriculture, forestry, fishing and hunting has made the biggest jump in the proportion of self-employed workers since 2001 (from 19.3% to 26%), followed by transportation and warehousing (16.2% to 20.2%).

While just over 10% of all jobs in the real estate industry are categorized as self-employed, nearly 70% of jobs (more than 5.5 million) in this sector are in the extended proprietors dataset. In this case, extended proprietors include part-time agents or people drawing income in a real estate partnership. The 11% in the self-employed category encompasses those who would list their real estate work as their main source of income.

Top and Bottom States for Self-Employed

Driven by a larger-than-average proportion of self-employed jobs in the arts and entertainment sector (as well as in forestry and logging), Vermont has the highest share of self-employment (11.6% of all workers) among all states and the District of Columbia. Maine (10.3%) and Montana (10.1%) are grouped closely together in the second and third spots, followed by California (9.7%), South Dakota (9%), and Idaho (9%).

By far the smallest share of self-employment is found in Washington, D.C. (2.1%), which is no surprise given that governments workers — regardless of the industry or agency — are considered wage and salary workers. After D.C., Delaware (4.4%), Virginia (5.4%), and New Jersey (5.4%) have the next-smallest shares.

The following table also shows 2001-2012 self-employment job growth and decline, and no state has expanded its self-employed workforce more than Arizona (36%). The growth of entrepreneurs has also been impressive in Texas (31%), Nevada (31%) and Florida (25%), while Nebraska has lost the largest percentage of self-employed workers (-11%, a loss of almost 9,000 jobs).

Since the heat of the recession in 2008, Vermont (8%) and Arizona (7%) have led the way in growth among the self-employed.

State Name

2012 Self-Employed Jobs

2001-2012 % Change

2012 Avg. Annual Wage

Proportion of Self-Employed (2012)

Rank

Source: Self-Employed - EMSI 2012.2 Class of Worker BETA

Vermont

41,529

15%

$28,064

11.60%

1

Maine

69,533

6%

$24,717

10.30%

2

Montana

49,910

-4%

$25,834

10.10%

3

California

1,660,324

21%

$28,851

9.70%

4

South Dakota

42,105

5%

$27,093

9.00%

5 (tie)

Idaho

64,217

13%

$24,718

9.00%

5 (tie)

Oregon

166,412

5%

$25,820

8.90%

7

New Hampshire

59,565

9%

$31,172

8.60%

8

Tennessee

245,723

15%

$27,071

8.20%

9

New Mexico

73,347

9%

$23,181

8.10%

10 (tie)

Colorado

209,822

16%

$25,616

8.10%

10 (tie)

Alaska

30,459

1%

$29,248

7.90%

12 (tie)

Arizona

215,044

36%

$24,549

7.90%

12 (tie)

Texas

934,704

31%

$27,079

7.70%

14

Wyoming

24,575

9%

$28,311

7.60%

15 (tie)

Oklahoma

134,732

0%

$24,850

7.60%

15 (tie)

Washington

251,891

18%

$26,057

7.60%

15 (tie)

Hawaii

55,097

16%

$28,896

7.60%

15 (tie)

Arkansas

97,671

8%

$22,687

7.50%

19 (tie)

Iowa

124,166

5%

$24,728

7.50%

19 (tie)

Florida

589,416

25%

$23,508

7.20%

21

North Dakota

33,105

-4%

$27,753

7.10%

22 (tie)

Kansas

106,887

9%

$26,231

7.10%

22 (tie)

Connecticut

126,400

4%

$32,882

7.00%

24

Nebraska

71,650

-11%

$26,269

6.90%

25 (tie)

Rhode Island

34,567

18%

$31,344

6.90%

25 (tie)

North Carolina

305,895

18%

$24,667

6.80%

27 (tie)

Mississippi

84,600

5%

$25,426

6.80%

27 (tie)

New York

644,061

13%

$28,829

6.80%

27 (tie)

Minnesota

198,691

4%

$25,460

6.70%

30 (tie)

Massachusetts

241,911

13%

$31,106

6.70%

30 (tie)

Louisiana

143,407

17%

$26,258

6.70%

30 (tie)

Missouri

196,695

8%

$24,634

6.70%

30 (tie)

Georgia

288,876

13%

$25,189

6.60%

34 (tie)

Alabama

137,245

14%

$26,014

6.60%

34 (tie)

Michigan

284,673

12%

$23,305

6.60%

34 (tie)

South Carolina

133,602

17%

$24,769

6.50%

37

Kentucky

128,914

-1%

$23,896

6.30%

38

Pennsylvania

378,801

8%

$28,930

6.10%

39

West Virginia

47,775

3%

$29,347

6.00%

40 (tie)

Wisconsin

176,142

-1%

$24,811

6.00%

40 (tie)

Ohio

331,482

5%

$25,331

6.00%

40 (tie)

Maryland

168,572

13%

$29,691

5.90%

43

Indiana

178,485

7%

$26,669

5.70%

44 (tie)

Nevada

70,034

31%

$28,109

5.70%

44 (tie)

Illinois

353,135

12%

$26,511

5.70%

44 (tie)

Utah

75,480

18%

$25,027

5.60%

47

New Jersey

226,039

10%

$32,994

5.40%

48 (tie)

Virginia

223,509

12%

$26,574

5.40%

48 (tie)

Delaware

19,935

4%

$28,018

4.40%

50

District of Columbia

16,680

13%

$44,523

2.10%

51

Total

10,567,489

14%

$26,921

A Look at MSAs

For the largest metropolitan statistical areas, Riverside, California has the highest percentage of self-employed workers (12.4%), followed by Los Angeles (10.5%). None of the other 30 largest MSAs has a double-digit presence of self-employed workers. Just missing that mark is Miami (9.7%), while San Francisco (9.3%) is also close.

New York City is right at the national average — 7.1% of its workforce is self-employed. Chicago is at 5.7%.

For all MSAs regardless of size, Guymon, OK (35.4%) and Rio Grande CIty-Roma, Texas (21.4%) have the largest percentage of self-employed workers. The lowest are Williston, North Dakota (2.6%) and Hinesville-Fort Stewart, Georgia (2.9%).

Takeaways

1. Recession’s Toll

There are almost 400,000 fewer self-employed jobs in the U.S. than in 2006, and the proportion of self-employed workers to the entire workforce is below pre-recession levels.

2. Highest-Paying Industries are Declining in Self-Employment

Of the 20 highest-paying industries with at least 100 self-employed jobs at the start of the recession, 17 have fewer self-employed workers in 2012 than in 2008. This includes offices of physicians and offices of dentists, both of which have declined 3%. Almost as pronounced is the drop in self-employment in legal services. In 2008, more than 214,000 self-employed jobs were classified under offices of lawyers; in 2012, it’s estimated to be 209,494, a 2% decline.

In 2009, Dane Stangler of the Kauffman Foundation wrote, “Contrary to popularly held assumptions, it turns out that over the past decade or so, the highest rate of entrepreneurial activity belongs to the 55-64 age group.” While our self-employed dataset does not solely contain entrepreneurs (see note above), EMSI data backs up Kauffman’s research. As we showed earlier, over 30% of all self-employed workers are over 55, and another 28% are 45-54.

4. Majority of Self-Employed are Men

Of the estimated 10.6 million self-employed jobs in the US, more than 6.6 million (63%) are held by men. This is in contrast to a much more even male/female breakdown (51% male/49% female) when we consider all wage and salary and self-employed jobs.

Joshua Wright is an editor at EMSI, an Idaho-based economics firm that provides data and analysis to workforce boards, economic development agencies, higher education institutions, and the private sector. He manages the EMSI blog and is a freelance journalist. Contact him here.

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